Question 1

A company's 2010 income statement reported total sales revenue of $1,200,000; accounts receivable increased by $25,000 and the unearned revenue account decreased $15,000 during 2010.How much cash was collected from customers during 2010?
A)$1,225,000
B)$1,160,000
C)$1,175,000
D)$1,185,000

Accepted Answer

Cash collected from customers ($1,160,000) = Sales revenue ($1,200,000) - Accounts receivable increase ($25,000) - Unearned revenue decrease ($15,000).

Question 2

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000.How much was the net cash flow from investing activities?
A)$6,250,000 outflow
B)$8,320,000 outflow
C)$8,270,000 outflow
D)$5,970,000 outflow

Accepted Answer

Net investing cash outflow ($5,970,000) = Equipment sale ($250,000) + Building purchase (-$6,500,000) + Short-term investment sale ($280,000)

Question 3

Which of the following is correct?
A)Repayments of principal and interest reduce financing activities cash flows.
B)Repurchase of treasury shares is a cash outflow connected to investing activities.
C)If a company borrows $450 million in long-term notes and repays $380 million of long-term notes, and then these items must both be disclosed and not netted against each other in the financing section.
D)Issuing common stock in exchange for the purchase of a building creates both a financing activity and investing activity cash flow.

Accepted Answer

Cash inflows and outflows can't be netted against each other.

Question 4

The financial statements for World Company show the following:
Cost of goods sold,$725,000. $\begin{array}{lrlrl}
&\text { Beginning Balance } & \text { Ending Balance }  \
\text { Merchandise Inventory } & \$ 45,000 & \$ 56,000 \
\text { Accounts Receivable } & 53,000 & 50,000 \
\text { Accounts Payable } & 37,000 & 42,000
\end{array}$ How much cash was paid to suppliers?
A)$731,000
B)$736,000
C)$719,000
D)$714,000

Accepted Answer

Cash paid to suppliers = Cost of goods sold + Increase in accounts payable - Decrease in merchandise inventory= $725,000 + ($42,000 - $37,000) - ($56,000 - $45,000)= $725,000 + $5,000 - $11,000= $731,000

Question 5

Which of the following statements about the capital acquisitions ratio is correct?
A)A high ratio indicates less need for outside financing of property, plant and equipment.
B)The ratio is computed by dividing cash flow from operations by the average net property, plant and equipment.
C)A low ratio may indicate a failure to update property, plant and equipment which can limit a company's ability to compete in the future.
D)The ratio is comparable across industries.

Accepted Answer

The capital acquisitions ratio is calculated by dividing cash flow from operating activities by cash paid for property, plant, and equipment. A high ratio implies the ability to finance fixed asset acquisitions from operations cash flows.

Question 6

Which of the following would not be a financing activities cash flow?
A)Issuing common stock for cash.
B)Cash dividend payments.
C)Purchasing treasury stock.
D)Purchase of a building by signing a note payable.

Accepted Answer

Purchasing a building by signing a note payable doesn't involve a cash flow.

Question 7

Lab Industries,Inc.,issued $50,000 of bonds,paid cash dividends of $8,000,sold long-term investments for $12,000,received $5,000 of dividend revenue,purchased treasury stock for $15,000,and purchased new equipment for $19,000.What is the net cash flow from financing activities?
A)$70,000 inflow
B)$27,000 inflow
C)$80,000 inflow
D)$20,000 outflow

Accepted Answer

Net financing cash inflow ($27,000) = Bond issue ($50,000) + Cash dividend payment (-$8,000) + Treasury stock purchase (-$15,000)

Question 8

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000.How much was the net cash flow from financing activities?
A)$2,300,000 outflow
B)$2,320,000 outflow
C)$2,530,000 outflow
D)$2,550,000 outflow

Accepted Answer

Net financing cash outflow (-$2,320,000) = Note payable principal payment(-$2,300,000) + Cash dividend payment (-$20,000)

Question 9

Madison Company had sales of $154,000.Additional information from the balance sheet is below: $\begin{array}{lrr}
&\text { Beginning Balance } & \text { Ending Balance }  \
\text { Accounts Receivable } & \$ 22,000 & \$ 28,000 \
\text { Accounts Payable } & 21,000 & 25,000
\end{array}$ How much cash was collected from customers?
A)$148,000
B)$150,000
C)$154,000
D)$160,000

Accepted Answer

The increase in accounts receivable is $6,000 ($28,000 - $22,000). This means that the company collected $6,000 less than its sales. Therefore, the company collected $154,000 - $6,000 = $148,000 from customers.

Question 10

During 2010,Edna Enterprises had a capital acquisitions ratio of 7.9.During 2010,Carlos' Corporation had a capital acquisitions ratio of 3.6.The amount of cash flow from operations was $5,968,000 for Edna's and $5,054,000 for Carlos.Which of the following statements is incorrect?
A)Edna used less cash for investments in property, plant and equipment during 2010 than did Carlos.
B)Edna has less need for external financing of its investments in property, plant and equipment indicated by its higher capital acquisitions ratio compared to Carlos.
C)Edna invested approximately $755,000 in property, plant and equipment during 2010.
D)Carlos invested approximately $182,000 in property, plant and equipment during 2010.

Accepted Answer

Carlos' capital acquisitions ratio (3.6) is calculated by dividing cash flow from operating activities ($5,054,000) by cash paid for property, plant, and equipment ($1,403,889).

Question 11

Milliken Company paid $2.2 million to purchase stock in another company,$1.0 million to repurchase treasury shares,$.5 million to buy short-term investments,sold used equipment for $.8 million when its book value was $.6 million,and purchased new equipment for $3.4 million.How much will be reported as net investing cash flow?
A)$6.3 million net cash outflow.
B)$5.3 million net cash outflow.
C)$5.1 million net cash outflow.
D)$4.8 million net cash outflow.

Accepted Answer

Net investing cash outflow ($5.3 million) = Purchase stock in another company (-$2.2) + Short-term investment purchase (-$.5) + Equipment sale ($.8) + Equipment purchase (-$3.4)

Question 12

Amanda Company reported income tax expense of $250,000.Beginning income taxes payable was $30,000,while ending income taxes payable was $25,000,and accounts payable decreased $10,000.How much cash was paid for taxes?
A)$280,000
B)$255,000
C)$245,000
D)$265,000

Accepted Answer

Cash paid for taxes ($255,000) = Income tax expense ($250,000) + Income taxes payable decrease ($5,000)

Question 13

Bold Company's 2010 income statement reported total sales revenue of $250,000.During 2010,accounts receivable decreased by $20,000 and accounts payable increased $10,000.How much cash was collected from customers during 2010?
A)$230,000
B)$270,000
C)$250,000
D)$280,000

Accepted Answer

Cash collected from customers ($270,000) = Sales revenue ($250,000) + Accounts receivable decrease ($20,000)

Question 14

Burich Co.reported short-term borrowings of $2.5 million,long-term borrowings of $6.8 million,repayments of long-term borrowings of $3.5 million,interest payments of $780,000,repurchase of treasury shares of $.5 million and cash dividends declared of $1.1 million.What is the cash flow from financing activities?
A)$5,300,000 net cash inflow
B)$4,200,000 net cash inflow
C)$1,700,000 net cash inflow
D)$2,800,000 net cash inflow

Accepted Answer

Net financing cash inflow ($5.3 million) = Short-term borrowings ($2.5 million)

Question 15

During 2010,Eva's Enterprises cash paid for property,plant and equipment was $755 million and cash flow from operations was $5,968 million.The average property,plant and equipment from the comparative balance sheets were $6,094 million.Compute Eva's Enterprises capital acquisitions ratio for 2010.
A)1.0
B)5.3
C)7.9
D)6.0

Accepted Answer

The capital acquisitions ratio (7.9) is calculated by dividing cash flow from operating activities ($5,968) by cash paid for property, plant, and equipment ($755).

Question 16

Which of the following statements about the capital acquisitions ratio is incorrect?
A)The ratio is computed by dividing cash flow from operations by cash paid for property, plant and equipment.
B)Because the need for investment in property, plant and equipment differs dramatically across industries, a firm's ratio should only be compared with its prior years' ratio or with firms in the same industry.
C)A high ratio indicates more need for outside financing of current and future purchases of property, plant and equipment.
D)It increases when an account receivable is collected.

Accepted Answer

The capital acquisitions ratio is calculated by dividing cash flow from operating activities by cash paid for property, plant, and equipment. A high ratio demonstrates less need for outside financing.

Question 17

Canadian Beer reported they sold equipment for $222 million cash and purchased $1,515 million of new equipment using cash.The equipment sold had a net book value of $150 million.Cash flow from investing activities would show
A)an inflow of $222 million and outflow of $1,515 million.
B)an inflow of $222 million and outflow of $150 million.
C)cash paid for equipment of $1,293 million.
D)a net outflow of $1,365 million.

Accepted Answer

The cash outflow ($1,515) and cash inflow ($222) are reported separately.

Question 18

During 2010,Tommy's Toys reported the following:
Long-term debt repayments,$503 million; interest paid,$143 million; proceeds from exercise of stock options,$27 million,and issue of common stock in exchange for land costing $10 million.How much is the 2010 net cash flow from financing activities?
A)$476 million net cash outflow.
B)$530 million net cash outflow.
C)$673 million net cash outflow.
D)$76 million net cash outflow.

Accepted Answer

Net financing cash outflow (-$476 million) = Long-term debt payment (-$503)+ Stock option proceeds ($27)

Question 19

Which of the following would be a financing activities cash flow?
A)Common stock dividends distributed.
B)Interest payments.
C)Repurchase of treasury shares.
D)Purchase of a building by signing a note payable.

Accepted Answer

Financing activities cash flows include treasury stock transactions

Question 20

Aaron Inc.reported operating expenses during 2011 of $765,000 (including $80,000 of depreciation expense).Prepaid expenses increased $25,000 while accrued liabilities increased $43,000.How much cash was paid for operating expenses during 2011?
A)$702,000
B)$622,000
C)$667,000
D)$703,000

Accepted Answer

Cash paid for operating expenses ($667,000) = Operating expenses ($765,000) - Depreciation expense ($80,000) + Prepaid expense increase ($25,000) - Accrued liability increase ($43,000)

Quiz 13: Statement of Cash Flows

A company's 2010 income statement reported total sales revenue of $1,200,000; accounts receivable increased by $25,000 and the unearned revenue account decreased $15,000 during 2010.How much cash was collected from customers during 2010?

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000.How much was the net cash flow from investing activities?

Which of the following is correct?

Which of the following statements about the capital acquisitions ratio is correct?

Which of the following would not be a financing activities cash flow?

Lab Industries,Inc.,issued $50,000 of bonds,paid cash dividends of $8,000,sold long-term investments for $12,000,received $5,000 of dividend revenue,purchased treasury stock for $15,000,and purchased new equipment for $19,000.What is the net cash flow from financing activities?

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000.How much was the net cash flow from financing activities?

During 2010,Edna Enterprises had a capital acquisitions ratio of 7.9.During 2010,Carlos' Corporation had a capital acquisitions ratio of 3.6.The amount of cash flow from operations was $5,968,000 for Edna's and $5,054,000 for Carlos.Which of the following statements is incorrect?

Amanda Company reported income tax expense of $250,000.Beginning income taxes payable was $30,000,while ending income taxes payable was $25,000,and accounts payable decreased $10,000.How much cash was paid for taxes?

Bold Company's 2010 income statement reported total sales revenue of $250,000.During 2010,accounts receivable decreased by $20,000 and accounts payable increased $10,000.How much cash was collected from customers during 2010?

During 2010,Eva's Enterprises cash paid for property,plant and equipment was $755 million and cash flow from operations was $5,968 million.The average property,plant and equipment from the comparative balance sheets were $6,094 million.Compute Eva's Enterprises capital acquisitions ratio for 2010.

Which of the following statements about the capital acquisitions ratio is incorrect?

Canadian Beer reported they sold equipment for $222 million cash and purchased $1,515 million of new equipment using cash.The equipment sold had a net book value of $150 million.Cash flow from investing activities would show

During 2010,Tommy's Toys reported the following: Long-term debt repayments,$503 million; interest paid,$143 million; proceeds from exercise of stock options,$27 million,and issue of common stock in exchange for land costing $10 million.How much is the 2010 net cash flow from financing activities?

Which of the following would be a financing activities cash flow?

Aaron Inc.reported operating expenses during 2011 of $765,000 (including $80,000 of depreciation expense) .Prepaid expenses increased $25,000 while accrued liabilities increased $43,000.How much cash was paid for operating expenses during 2011?